Businesses must learn from social networks

May 4, 2007

Social networks are the best way for companies to understand the future of how content will be distributed and consumed. That’s according to Dan Scheinman, senior vice president of Cisco Systems’ Media Solutions Group and the architect of Cisco’s acquisitions of Linksys and Scientific Atlanta.

During Scheinman’s keynote address at the US Digital Living Connections Conference, he talked about how digital media is disrupting the tech and entertainment industries. Usually that means talking about networking standards and media servers but Scheinman’s recommendations, instead, were a bit more pop culture than geek culture.

He said: “A lot of you should go spend time on Facebook and MySpace. Spend time to understand why social media really does matter.” Social communities are the solution to some of the biggest problems facing Hollywood and other content providers in today’s Digital Era, Scheinman said.

Though it may sound like an activity relegated to high school and college kids, social networking is going to be the avenue for marketers and media companies to reach consumers and enterprise customers alike, he said. The technology and entertainment industries are both being forced to change the way they do business because of what have mostly been consumer-oriented technologies.

Personal video recorders have changed the way marketers and advertisers get product messages to people. For example, though many consumers have the power to skip past a Coke commercial, the unexpected success of the Diet Coke and Mentos Experiment video made popular on YouTube affords Coca-Cola a whole new way of advertising products in a user-generated content environment.

He said: “It’s the beginning of a new era. Consumers are driving the next set of value creations. All the energy in tech industry is around consumer apps.” That’s evident by the success of Google, Skype, Yahoo! and YouTube, he added. And it’s completely different to how Silicon Valley has operated for the past three decades.

Ideas and businesses no longer move through the traditional pattern: from universities to banks to enterprise to service providers. Instead, they now go from universities to the consumer to service providers and then to enterprise, he said.

High-definition entertainment was in homes for years before it got into enterprise, he noted. Same with search and social networks. “Enterprise is last now. We have 1,500 employees on Facebook because we don’t have the internal tools to provide community,” Scheinman said. “A lot of the enterprise has been behind in adopting all these tools.”

Traditional content providers (such as Hollywood) are just starting to understand the importance of consumers wanting to share their media socially and on the devices of their choosing, he said. Consumers now have the power to do what they want when they want it (mostly) and Cisco is moving toward a consumer presence there. At this year’s Consumer Electronic Show the company announced it would be releasing Cisco branded products such as set-top boxes.

Scheinman added: “A giant IP network is what’s between content and user. That’s one of the reasons we acquired Linksys and Scientific Atlanta.”

The next-generation connected home has been promised for some time now but broadband adoption – now at 35 per cent in the US – is making it a reality, he said.

So many media choices for consumers has made Hollywood even more dependent on mass hits, he said. And the way to understand what consumers want? Social networks. “It’s the beginning of the solution to all of these problems. If you want someone to see your stuff and pay for it you have to figure out how you’re going to distribute it.”

That’s why News Corp’s acquisition of MySpace “was one of the most brilliant moves in the industry”, Scheinman said. “It is truly remarkable because there’s this massive community… people are spending three hours a day on MySpace. And [Rupert Murdoch] knows this is central to the question of what will happen.”

Though the picture isn’t entirely clear yet with how the connected home will come together seamlessly for consumers, or how traditional media leaders like studios and record companies will join in the new era of digital media, Scheinman is confident that increasingly democratised landscape for the advancement of technology is more fertile than ever.

He said: “There will be more value creation in the next few years than even in the bubble times.”